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Law applicable to contracts

What is the law applicable to contracts under private international law provisions?

It is particularly important to firstly note the essential distinction between contracts and unilateral acts. While the law applicable to unilateral legal acts is regulated and explained by the provisions of the new Romanian Civil Code, the law applicable to contracts is established by the Rome I Regulation, in this sense art. 2640 of the New Civil Code specifying that the law applicable to contractual obligations will be determined according to the regulations of European Union law. The second paragraph states that what concerns the issues not covered by EU regulations, will be applicable provisions of the New Civil Code on the law applicable to unilateral acts, except in the situation of contrary provisions of international conventions or specific provisions.

This article aims to analyze the law applicable to contracts under private international law, thus in accordance with the Rome I Regulation, and not the law applicable to unilateral legal acts.

When talking about the law applicable to contracts, it is essential to set out two aspects, namely: the formal conditions of a contract and the substantive conditions of the contract.

Art. 11 of the Rome I Regulation states that a contract is valid in terms of its formality if it meets the requirements of the law governing its content. It is natural and useful that the law applicable to the form and substance of the contract to be the same because in any case it will be desirable a consistent regulation of all contractual aspects, by the same law.

However, a contract will be considered validly concluded in form, even if it does not meet the requirements of the law which governs the substance, when complying with one of the following laws:

- Law of the place where the contract is concluded when both signatories are on the same territory;

- National law of at least one contracting party or law of the country that at that time was the habitual residence of either of the parties when co-contractors or their representatives are in different countries;

- The law of the country where the property is situated if it can not be derogated from these provisions by convention, when a contract concerns an immovable property or a right of tenancy of real estate.

Regarding the substantive law applicable to the contract, we talk about what is called lex voluntatis, namely the law chosen by the parties to govern the substance of the agreement, this represents a strong manifestation of autonomy and contractual freedom on the private international law plan .

The choice of the governing law of the contract shall be expressly stated or undoubtedly shown by the circumstances or the contents of the contract. It is also useful to note that the parties may choose the law applicable to the whole contract or only a part thereof. In principle, the parties may choose the law of any state to govern the contract thus concluded.

When the parties do not designate the law applicable to the contract, a judicial organ will use certain criteria to place the contract in the scope of a legal system. Thus, it will proceed to the objective location of the contract and the contract is to be awarded the law of the state with which it is most closely connected to. In the case of contracts it was established that the state law with which the contract is most closely connected is represented by the concept of characteristic performance of the borrower.

If the state law with which the contract has the closest connection to can not be determined, Regulation no. 593/2008 (ROMA I) establishes the law applicable to each type of contract; the law appeared to be, in every case, the law of the country where the debtor of the characteristic performance has his habitual residence.

If you are in the position of not knowing the law applicable to a contract under private international law provisions, see the list of lawyers within the law firm Darie, Manea & associates that will ensure skilled legal advice and representation before competent authorities in the case that you wisht to addressing a judicial organ in order to determine the applicable law. Do not hesitate to contact us!

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